Brands beware: ethical minefields ahead

April 2024, Written by Jim Northover

For some time now brands have been encouraged to develop a conscience – to show that entrepreneurial capitalism can, and should, care about more than financial returns.

The concept of the triple bottom line emerged to steer corporate attention towards not just profit, but also social and environmental concerns. Corporate Social Responsibility (CSR) and more recently Environment, Social, Governance (ESG) policies have been created to point investors towards brands that commit to taking these issues seriously.

Not only investors, but employees and consumers too increasingly expect companies to be accountable in terms of transparency and sustainability.

This raises bigger issues than it would appear at first sight. How are these criteria for ethical responsibility measured, and by whom? Are the results of measurement comparable across different companies? For conglomerates housing multiple brands, how do they evaluate these standards on an individual basis?

Perhaps even more crucially, these issues touch on how brands define their purpose and how they reflect their values, which are often conceived by those in the C-suite and validated by employees huddled in workshop sessions led by brand consultants. These worthy aspirations are intended to guide corporate culture and behaviour. As a result, employees, including those at the top, may find themselves held to higher standards than many of those in public life. CEOs at McDonald’s, Uber and NBC Universal were all fired for misconduct or discrimination in relation to other employees.

Within this arena of ethics, accusations of hypocrisy, virtue-signalling, or greenwashing have created a minefield for brands. It’s easy to step out of line, especially when grappling with issues of gender, race, and inclusivity, which evoke heightened emotions and, in many cases, have not yet been contemplated enough by brand owners before being made into policies. This leads to a disjointed connection between intention and execution, which can then lead to ethical conflicts.

At times, these ethical quandaries erupt dramatically into public view. A prime example is the case of Coutts Bank. The bank, while noting its reservations regarding a particular customer’s ‘xenophobic, chauvinistic, and racist views’ internally, asserted its decision to drop them as a client was predicated solely on commercial rationale. The revelation of the true motivation led to the forceful resignation of two CEOs, and begs some questions: Was the bank applying its own internal principles to a customer? Was this equitable? Would the same measure have been taken with a more valuable customer?

Brands may claim that they aim to align their customers with their ethical ethos, establishing a two-way loyalty. Some go even further, anticipating that customers will embrace their aspirations and become ‘part of the family’. This ethos is rooted in the idea of ‘impact’ – the tangible difference the brand makes in the real world.

Consider Tom’s, the US shoe company, which explicitly dedicates a third of its profits to mental health initiatives and other charitable causes. Patagonia, the outdoor clothing brand, positions itself as an environmental advocate, even offering templates for complaint letters to address local pollution infringements.

Yet, as the world evolves, brands often grapple with a shifting landscape. Brands like Shell, for example, struggle to tell an environmentally positive story while transitioning from an existing business model in the beleaguered fossil fuel sector. Others like Thames Water claim to be ‘passionate about protecting our most precious resource’ while favouring shareholder returns over customers’ interests and investment in infrastructure.

In an era where public pressure and demands for transparency are growing stronger, a glaring spotlight falls on brands that overlook ethics or fail to uphold their declared values when crafting their purpose and identity. The challenge is for brands to walk the talk, align their actions with their intentions, and stand tall amidst the ethical labyrinth.